EUR/USD may be on the verge of a deeper correction as optimism about U.S. trade policy revives risk appetite, cooling the safe-haven demand that previously supported the pair. With U.S. equity markets rallying and European data underwhelming, technical and fundamental signals suggest bearish risks are growing ahead of Friday’s crucial economic releases.
Haven Demand Cools as U.S. Sentiment Turns
Earlier in April, EUR/USD surged over 10 big figures as investors sought shelter from global uncertainty. However, with renewed optimism around Donald Trump’s potential softening on tariffs, that narrative is rapidly reversing. The euro, along with traditional havens like gold and the yen, has seen buying interest dry up as risk-on sentiment reemerges.
Correlation data confirms this trend, with EUR/USD closely tracking movements in other haven assets. With the U.S. market now pricing in fewer immediate threats from tariffs, demand for safety has sharply declined. As a result, euro bulls are showing signs of fatigue, and selling pressure has emerged on even modest price rebounds.
Eurozone Data Fades Just as U.S. Confidence Rises
Compounding the euro’s woes is a notable shift in economic data surprises. Citi’s EUR Economic Surprise Index (CESI) has slipped into negative territory, indicating that eurozone data is consistently underperforming expectations. This reversal contrasts sharply with Q1, when growth across the bloc was surprising to the upside.
Key Technical Levels at Risk Ahead of US Payrolls
Friday’s release of U.S. non-farm payrolls and flash eurozone inflation will be pivotal. These data points could confirm or challenge the recent price action, potentially triggering increased volatility. Given the direct influence of labor market data on U.S. monetary policy expectations, the payrolls figure will be especially critical for EUR/USD traders.
If those levels fail, the next major downside target lies around 1.1200, with deeper losses potentially extending toward 1.0900 or the 200-day moving average.
Conclusion
With eurozone data starting to disappoint and U.S. optimism improving, EUR/USD is now at a crossroads. Traders will be watching closely as the pair tests key support levels, with Friday’s economic releases likely to determine whether the recent pullback evolves into a deeper correction. As haven flows dry up and sellers emerge on rallies, the EUR/USD forecast tilts cautiously bearish in the short term.
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